Recharacterized Roth IRA contributions after tax filing deadline - missed the 2023 deadline, what penalties apply?

The recharacterization deadline is indeed the tax filing deadline (including extensions), so you're right that you missed it for 2023 contributions. Here's what you need to know: For the excess contribution, you'll likely owe the 6% excise tax penalty since you didn't correct the excess before the deadline. This penalty applies for each year the excess remains in the account, so you'll report it on Form 5329 with your 2023 taxes (requiring an amendment) and potentially for 2024 as well if not corrected. Your recharacterization is still technically valid even though it was late - the IRS doesn't void the transaction. However, it doesn't eliminate the penalty for the original excess contribution. The gains you mentioned ($580) will need to be reported as income in the year of the recharacterization (2024). The backdoor Roth conversion you did after recharacterizing is also still valid. This will be reported on your 2024 taxes since that's when the conversion occurred. You should file an amended 2023 return to report the excess contribution and pay the 6% penalty. Then on your 2024 return, you'll report both the recharacterization and the conversion.

I went through something similar last year and found this amazing tool at https://taxr.ai that saved me so much headache with my IRA mess. I also missed a recharacterization deadline because I didn't realize my income had gone over the Roth MAGI limits. The tool analyzed all my documents and actually identified that my custodian had coded the recharacterization incorrectly on my 1099-R, which would have caused even more issues. It walks you through exactly how to handle the Form 5329 for the excess contribution penalty and how to properly report everything on Form 8606 for the non-deductible contribution and conversion. What I found most helpful was that it explained the whole sequence of how to report everything across tax years - something even my accountant was confused about. Might be worth checking out since you'll need to file that amended return and then handle the reporting correctly for 2024.

Just wanted to follow up and say I tried https://taxr.ai after seeing the recommendation here. I was skeptical because my situation with the SEP-IRA and missed recharacterization deadline seemed really complicated, but it actually worked amazing. The tool immediately identified my excess contribution issue and calculated the exact penalty amount. What really surprised me was that it showed me a mistake in how my backdoor Roth was handled last year that my accountant missed - I wasn't properly tracking my non-deductible basis which would have caused major headaches down the road. It generated the complete Form 5329 for my excess contribution penalty and Form 8606 showing my non-deductible contribution and conversion with the correct basis amounts. Totally worth it for the peace of mind knowing everything is being reported correctly.

I had the same issue with a late recharacterization last year and spent DAYS trying to reach someone at the IRS to confirm what forms I needed to file. It was absolute torture with hold times of 2+ hours only to get disconnected or transferred to someone who didn't understand IRA recharacterizations. Finally found https://claimyr.com and used their service to get through to an IRS agent who specializes in retirement account issues. They call the IRS for you and then connect you once they reach an agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with explained that I needed to file both the Form 5329 for the penalty AND Form 8606 for the year of the conversion, which my tax software wasn't clear about. They also told me exactly how to report the earnings on the recharacterized amount. Totally worth it to get actual IRS confirmation on such a confusing issue.

Just wanted to update after trying the Claimyr service mentioned above. I was definitely skeptical at first, but my situation with missed Roth recharacterization deadlines was so complicated that I needed official guidance. The service connected me to an IRS tax specialist in about 45 minutes (versus the 3+ hours I spent on hold myself last week before giving up). The agent confirmed exactly what I needed to do - file Form 5329 with my amended return to pay the 6% penalty, and then use Form 8606 to track my non-deductible basis for the backdoor Roth conversion on my 2024 return. The most valuable part was getting confirmation that my late recharacterization was still valid for tax purposes even though it doesn't eliminate the penalty. The agent even sent me the specific IRS publication sections that address my situation. Huge relief to have official guidance instead of just piecing together advice from the internet.

Has anyone dealt with the notification you get from your IRA custodian for Form 1099-R after doing a recharacterization? Mine shows distribution code J, but I'm confused about whether this creates a taxable event beyond the penalty for excess contribution.

One thing nobody's mentioned - if you don't want to go through amending your 2023 return, there's another way to handle excess Roth contributions. You can actually just leave the excess amount in there and keep paying the 6% penalty each year, OR you can "absorb" the excess by reducing your contribution limit for 2024. For example, if you're eligible to contribute $7,000 in 2024, you could just contribute $500 ($7,000 - $6,500) and the previous year's excess would be absorbed. You'd still pay the 6% for 2023, but then you're back on track without the recharacterization hassle.

I'm dealing with a very similar situation and wanted to share what I learned from my tax attorney. The key thing to understand is that even though you missed the deadline, your recharacterization is still legally valid - it just doesn't eliminate the penalty for the original excess contribution. Here's what you'll need to do: 1. File Form 1040-X to amend your 2023 return, including Form 5329 to pay the 6% excess contribution penalty ($390 on your $6,500) 2. On your 2024 return, you'll report both the recharacterization and the backdoor conversion using Form 8606. The $580 in earnings will be taxable income in 2024. 3. Make sure your IRA custodian coded everything correctly on your 1099-R forms - you should have received separate forms for the recharacterization (code J) and the conversion (typically code 2). The good news is that once you pay the penalty for 2023, you won't owe it again since the excess was corrected through recharacterization. Just make sure to keep detailed records of your basis for future tax years since you'll now have non-deductible traditional IRA contributions on your books. Don't stress too much - this is fixable, just requires the right paperwork!